When the nation switched over to Chip and PIN technology in 2006, the UK saw ‘the largest change in the way we pay’ since decimalisation. Ten years on we’re about to see a host of mobile wallet technology hit British shores, the roll out of contactless on trains and buses across the UK and contactless terminals in every shop by 2020.
So what has made going cashless such a popular movement?
You might not think it, but the privilege of carrying cash around with you comes at a hefty price. The cost of banknote creation last year totalled £33 million in production costs and £27 million for issue, custody and payment of banknotes. Going cashless could reduce the cost of cash creation and, in fact, the demand for banknotes has already fallen due to the popularity of cards and contactless payments.
The introduction of anti-counterfeit money is proving expensive too, costing 50 percent more than regular notes. New polymer banknotes could also cost businesses £236 million in ATM, vending machine and self-service machine recalibration or replacement – a cost which may ultimately be levied against the customer.
Sophisticated anti-fraud technology also features in both contactless cards and the terminals we use, making a money exchange safer for both customer and business, and Touch ID buttons on smartphones offer another layer of security and speed.
Handling cash payments requires trained employees and security measures, which makes it an expensive task. Without the need for physical accounting, security and cash collection, the time and money saved could trickle down to benefit the consumer in more competitive pricing.
Transport for London is a great example of incentivising contactless technology, whereby the customer pays more by using cash. We’re also seeing terminals and technology increasingly used in car parks, which means not having to collect and empty cash on a daily basis. These cost savings can then be passed down to the customer.
Being able to manage your finances even more effectively online will be a major point of innovation for payment tech. Customers willing to go cashless and digitally organise their money will ultimately benefit from more intelligent financial services.
Virtual assistants like Apple’s Siri and Amazon’s Alexa are already becoming much more intelligent and we’ll increasingly see financial services using artificial intelligence to gather and offer advice to customers. This will help them make better decisions about their financial wellbeing, which can only have a positive effect on society.
While speed, convenience and security convinced Britain’s early adopters, it’s the potential for improved ‘smart’ financial services and greater connectivity between payment tech and other products and services in the future that could become one of the biggest incentives in the decision to go cashless.
Gary Watts is head of innovation at MBNA.
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Benefits for the consumer and the company indeed. But unfortunately many places actually charge more for paying by card rather than cash. In particular, car parks are notorious for adding a "service charge" to app/card payments which rally baffles me in light of the many benefits and cost savings the operators get from cashless payments. Any suggestions on how card operators can help change that behaviour?